3 leading contenders to replace Warren Buffett

Warren Buffett, 86, has no immediate plans to retire, but investors all over the world still wonder who will replace him as CEO of Berkshire Hathaway (BRK-A, BRK-B) once his tenure does come to an end.

“Both the board and I believe we now have the right person to succeed me as CEO – a successor ready to assume the job the day after I die or step down,” Buffett wrote in his 2014 shareholder letter. “In certain important respects, this person will do a better job than I am doing.”

In a recent note, Barclays analysts led by Jay Gelb evaluated the merits of three Berkshire executives presumably in the running for the top role. Those executives include: Ajit Jain, the 65-year-old head of Berkshire’s reinsurance businesses; Berkshire Hathaway Energy head Greg Abel, 54; and Matt Rose, the 57-year-old executive chairman of Berkshire-owned BNSF Railway.

“Make the trade!”

Jain attended Harvard Business School in 1978. Before joining Berkshire, he worked for IBM’s data processing business and for McKinsey & Co., according to a profile of him in Berkshire’s hometown newspaper, the Omaha World-Herald.

When he joined Berkshire in 1986, Jain had no experience with insurance. But he was charged with reviving Berkshire’s struggling reinsurance business, a type of insurance that lets insurers cover their own risk. Jain got a shout-out in Buffett’s 2016 letter for turning that business around and creating billions of dollars for shareholders.

Ajit Jain, who runs some of Berkshire’s insurance operations, plays a game of bridge during Berkshire Hathaway Shareholders annual meeting in Omaha, Nebraska in this May 3, 2009 file photo. REUTERS/Carlos Barria

Jain and Buffett are in close contact. In fact, Buffett has said Jain is the only executive he speaks with on a daily basis, Barclays pointed out. This would all seem to bode well for the possibility that Jain would later become CEO. Still, Barclays pointed out that Jain might be so indispensable in his current role that Berkshire wouldn’t remove him from it.

“Mr. Jain might remain focused on Berkshire’s vast commercial insurance and reinsurance operations rather than be the frontrunner to succeed Mr. Buffett as CEO of Berkshire,” the Barclays note stated.

‘The most experience with bolt-on acquisitions’

Greg Abel earned a commerce degree from the University of Alberta in 1984. Subsequently, he spent some time at Price Waterhouse (before it merged with Coopers & Lybrand) and at CalEnergy. He joined Berkshire Hathaway in 1992. But, according to the Omaha World-Herald, he didn’t get a mention in Buffett’s annual shareholder letter until a decade later.

“Dave Sokol, MEHC’s [MidAmerican Energy Holdings Co.] CEO, and Greg Abel, his key associate, are huge assets for Berkshire. They are dealmakers, and they are managers,” Buffett wrote.

In this April 30, 2010 photo, Greg Abel is seen in Omaha, Neb. (AP Photo/Nati Harnik, file)

In its note, Barclays cited Abel’s deal-making as an asset that set him apart from the other contenders for CEO.

“Among the three likely candidates for a higher leadership role, we view Mr. Abel as having the most experience in bolt-on acquisitions,” the note said, referring to acquisitions made with the purpose of merging the acquired company with a division of the acquirer.

An ‘outstanding CEO’ and ‘extraordinary manager’

Matt Rose holds a marketing degree from the University of Missouri. Rose was at the helm of BNSF Railway in 2009 when Berkshire decided to acquire the 77.4% of the railway company it didn’t already own. It was the largest deal in Berkshire history at the time.

In 2015, Buffett said Rose was not out of the running to be CEO, Barclays pointed out. That’s despite the fact that Buffett said in 2014 that BNSF had “disappointed many of its customers” with service delays.

“These shippers depend on us, and service failures can badly hurt their businesses,” Buffett wrote, without calling Rose out by name.

While Buffett delivered harsh words about BNSF that year, in his 2015 letter he credited Rose by name with the railroad’s turnaround.

“The most important development at Berkshire during 2015 was not financial, though it led to better earnings. After a poor performance in 2014, our BNSF railroad dramatically improved its service to customers last year,” Buffett wrote.

Later on in that section of the letter, Buffett wrote: “For most American railroads, 2015 was a disappointing year. Aggregate ton-miles fell, and earnings weakened as well. BNSF, however, maintained volume, and pre-tax income rose to a record $6.8 billion* (a gain of $606 million from 2014). Matt Rose and Carl Ice, the managers of BNSF, have my thanks and deserve yours.”

In his 2012 shareholder letter, Buffett praised Rose and Abel for being “outstanding CEOs” and “extraordinary managers.”

Regardless of whether one of them, or Jain, becomes CEO of Berkshire Hathaway, it’s clear that all three contenders likely have long futures ahead of them at the company.